In the U.S., when we refer to an Account-to-Account (A2A) transfer, most think of that as a me-to-me movement of funds from one account at a financial institution to another account owned by the same individual or business at another institution. Elsewhere in the world, A2A refers to the payment for goods to a merchant at a digital or physical point-of-sale. This article in Finextra looks at the growth of account payments for purchases in the UK and EU and finds that while it’s been slower than expected in catching on, there are signs of greater acceptance and the author of the article believes that its adoption will be swift. Its growth will be fascinating to watch, but I don’t expect similar growth to occur in the U.S. Here are excerpts from the article:
The noise around account-to-account (A2A) payments is starting to swell as people pick up on the benefits. FIS’ Global Payments Report 2020 predicted that A2A payments will account for 20% of all e-commerce payments, surpassing both credit and debit cards by 2023. But are we ready?
An A2A payment is simply where the payment moves directly from the payer’s bank to a merchant or service provider’s bank. They’ve been around for years, traditionally used by consumers to schedule regular bill payments, such as direct debits. Thanks to the maturing Open Banking movement, now a 3-year-old toddler rather than an infant, A2A payments have the opportunity to shift from an ‘alternative’ payment method to a mainstream one.
Open Banking-enabled A2A payments can in theory be used by anyone with a bank account. There’s no need to sign up for anything. And because people will be authenticating in a banking app they likely use every day, it’s extremely intuitive and familiar for consumers.
While expectations are high, and the potential growth in adoption is huge, there’s also healthy skepticism. Some believe that Open Banking is held back by a lack of fully functioning APIs. Whilst it’s true that if the foundations of the APIs aren’t stable then this won’t work, it’s also true that, thanks to the work of the Open Banking Implementation Entity (OBIE), the APIs as well as the UX in the UK are robust and ready.
We’re seeing an increase in use cases for A2A payments as Open Banking takes a firmer hold. There are e-commerce purchases and paying bills, but the fastest-growing use case is debt repayments. In the UK, one in four credit cards can now be paid off using an A2A payment.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group